FIRST QUARTER 1995
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the Quarterly Period Ended March 31, 1995
--------------------
Commission File Number 1-9608
NEWELL CO.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3514169
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Newell Center
29 East Stephenson Street
Freeport, Illinois 61032-0943
(Address of principal executive offices) (Zip Code)
(815)235-4171
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been
subject to such filing requirements for the past 90 days.
Yes ___X___ No ______
Number of shares of Common Stock
outstanding as of April 21, 1995: 157,954,134
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NEWELL CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 31,
-------------------------
1995 1994
----------- ----------
Unaudited
(In thousands, except
per share data)
Net sales $ 556,579 $ 443,486
Cost of products sold 389,764 308,686
----------- ----------
GROSS INCOME 166,815 134,800
Selling, general and
administrative expenses 93,420 77,043
----------- ----------
OPERATING INCOME 73,395 57,757
Nonoperating expenses (income):
Interest expense 11,838 5,461
Other 1,392 (210)
----------- ----------
Net nonoperating expenses (income) 13,230 5,251
----------- ----------
INCOME BEFORE INCOME TAXES 60,165 52,506
Income taxes 24,066 21,002
----------- ----------
NET INCOME $ 36,099 $ 31,504
=========== ==========
Earnings per share $ 0.23 $ 0.20
=========== ==========
Dividends per share $ 0.10 $ 0.09
=========== ==========
Weighted average shares 157,903 157,684
=========== ==========
See notes to consolidated financial statements.
2
NEWELL CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1995 1994
------------ ------------
Unaudited
(In thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 10,019 $ 14,892
Accounts receivable, net 313,473 335,806
Inventories 465,214 420,654
Deferred income taxes 84,590 90,063
Prepaid expenses and other 58,509 56,256
------------ ------------
TOTAL CURRENT ASSETS 931,805 917,671
MARKETABLE EQUITY SECURITIES 78,710 64,740
OTHER LONG-TERM INVESTMENTS 185,432 183,372
OTHER ASSETS 164,835 182,906
PROPERTY, PLANT AND EQUIPMENT, NET 473,726 454,597
GOODWILL 676,638 684,990
------------ ------------
TOTAL ASSETS $2,511,146 $2,488,276
============ ============
See notes to consolidated financial statements.
3
NEWELL CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONT.)
March 31, December 31,
1995 1994
------------ ------------
Unaudited
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 214,997 $ 209,720
Accounts payable 111,463 112,269
Accrued compensation 35,147 48,461
Other accrued liabilities 282,292 305,878
Income taxes 37,221 8,271
Current portion of long-term debt 99,425 99,425
------------ ------------
TOTAL CURRENT LIABILITIES 780,545 784,024
LONG-TERM DEBT 408,216 408,986
OTHER NONCURRENT LIABILITIES 149,087 152,697
DEFERRED INCOME TAXES 22,440 17,243
STOCKHOLDERS' EQUITY
Par value of common stock issued: 157,951 157,844
1995 - 157,951,344 Shares
1994 - 157,843,590 shares
Additional paid-in capital 176,556 175,352
Retained earnings 809,170 788,862
Net unrealized gain on securities
available for sale 18,250 9,868
Cumulative translation adjustment (10,898) (6,466)
Treasury stock (at cost): (171) (134)
1995 - 7,984 shares
1994 - 6,567 shares
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 1,150,858 1,125,326
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,511,146 $2,488,276
============ ============
See notes to consolidated financial statements.
4
NEWELL CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
-------------------------
1995 1994
----------- ----------
Unaudited
(In thousands)
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
Net Income $ 36,099 $ 31,504
Adjustments to Reconcile Net Income to Net
Cash Provided from Operating Activities:
Depreciation and amortization 23,100 23,927
Deferred income taxes (5,865) 2,362
Net gain on marketable equity securities - (213)
Other 95 (180)
Changes in Current Accounts:
Accounts receivable 22,333 3,591
Inventories (44,560) (12,475)
Other current assets, accounts payable
accrued liabilities and other (591) (14,541)
----------- ----------
NET CASH PROVIDED FROM OPERATING ACTIVITIES 30,611 33,975
----------- ----------
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (18,211) (12,177)
Sale of marketable equity securities - 833
Disposal of noncurrent assets and other (7,293) (4,628)
----------- ----------
(25,504) (15,972)
----------- ----------
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
Proceeds from issuance of debt 9,691 147,810
Proceeds from exercised stock options and other 1,304 1,515
Payments on notes payable and long-term debt (5,184) (155,069)
Cash dividends (15,791) (14,191)
----------- ----------
(9,980) (19,935)
----------- ----------
DECREASE IN CASH AND CASH EQUIVALENTS (4,873) (1,932)
Cash and cash equivalents at beginning of year 14,892 2,866
----------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,019 $ 934
=========== ==========
See notes to consolidated financial statements.
5
NEWELL CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - The condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to the
rules and regulations of the Securities and Exchange
Commission, and reflect all adjustments necessary to present
a fair statement of the results for the periods reported,
subject to normal recurring year-end audit adjustments, none
of which is material. Certain information and footnote
disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that
the disclosures are adequate to make the information
presented not misleading. It is suggested that these
condensed financial statements be read in conjunction with
the financial statements and the notes thereto included in
the Company's latest Annual Report on Form 10-K.
Note 2 - On August 29, 1994, the Company acquired Home Fashions, Inc.
("HFI"), a manufacturer and marketer of decorative window
coverings, including vertical blinds and pleated shades.
The purchase price was $130.4 million in a cash. HFI was
combined with Levolor and together they are operated as a
single entity called Levolor Home Fashions. On October 18,
1994, the Company acquired Faber-Castell Corporation, which
is a leading maker and marketer of markers and writing
instruments, including wood-cased pencils and rolling ball
pens, whose products are marketed under the Eberhard Faber
brand name ("Eberhard Faber"). The purchase price was
$137.3 million in cash. Eberhard Faber was combined with
Sanford and together they are operated as a single entity
called Sanford. On November 30, 1994, the Company acquired
the European consumer products business of Corning
Incorporated ("Newell Europe"). This acquisition included
Corning's consumer products manufacturing facilities in
England, France and Germany, the European trademark rights
and product lines for Pyrex, Pyroflam and Visions brands in
Europe, the Middle East and Africa, and Corning's consumer
distribution network throughout these areas (Pyrex and
Visions are registered trademarks of Corning Incorporated).
Additionally, the Company became the distributor in Europe,
the Middle East and Africa for Corning's U.S.-manufactured
cookware and dinnerware brands. The purchase price was
$86.9 million in cash. These transactions were accounted
for as purchases; therefore, the results of operations for
HFI, Eberhard Faber and Newell Europe are included in the
accompanying consolidated financial statements since their
respective dates of acquisition. The cost of the 1994
acquisitions was allocated on a preliminary basis to the
fair market value of assets acquired and liabilities assumed
and resulted in goodwill of approximately $156.6 million.
6
The unaudited consolidated results of operations for the three
months ended March 31, 1995 and 1994 on a pro forma basis, as though
HFI, Eberhard Faber and Newell Europe each had been acquired on
January 1, 1994 are as follows:
1995 1994
------ ------
(In millions, except per share data)
Net sales $556.6 $545.8
Net income 36.1 29.3
Earnings per share 0.23 0.19
Note 3 - Cash paid during the first three months for income taxes and
interest was as follows:
Three Months Ended
March 31,
1995 1994
------ ------
(In millions)
Income taxes $ 2.1 $ 4.8
Interest 13.7 8.8
Note 4- The components of inventories at the end of each period, net
of the LIFO reserve, were as follows:
March 31, December 31,
1995 1994
------ ------
(In millions)
Materials and supplies $ 97.3 $ 81.7
Work in process 98.6 98.9
Finished products 269.3 240.1
------ ------
$465.2 $420.7
====== ======
Note 5 - Long-term marketable equity securities at the end of each
period are summarized as follows:
March 31, December 31,
1995 1994
------ ------
(In millions)
Aggregate market value $ 78.7 $ 64.7
Aggregate cost 48.3 48.3
------ ------
Unrealized gain, net $ 30.4 $ 16.4
====== =====
7
Note 6 - Property, plant and equipment at the end of each period
consisted of the following:
March 31, December 31,
1995 1994
-------- --------
(In millions)
Land $ 12.2 $ 9.6
Buildings and improvements 168.8 164.8
Machinery and equipment 536.6 515.8
-------- --------
717.6 690.2
Allowance for depreciation (243.9) (235.6)
-------- --------
$ 473.7 $ 454.6
======== ========
Note 7 - Notes Payable at the end of each period consisted of the
following:
March 31, December 31,
1995 1994
-------- --------
(In millions)
Commercial paper(short-term) $ 120.0 $ 117.1
Other notes payable 95.0 92.6
------- -------
$ 215.0 $ 209.7
======== ========
Note 8 - Long-term debt at the end of each period consisted of the
following:
March 31, December 31,
1995 1994
-------- --------
(In millions)
Medium-term notes $ 186.0 $ 186.0
Commercial paper 300.0 300.0
Other long-term debt 21.6 22.4
-------- --------
507.6 508.4
Current portion (99.4) (99.4)
-------- --------
$ 408.2 $ 409.0
======== ========
Commercial paper in the amount of $300.0 million is classified as
long-term since it is supported by the revolving credit agreement
discussed in the liquidity and capital resources section on page 11.
8
PART I. Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
---------------------------------------------
Results of Operations
The following table sets forth for the periods indicated the items
from the Consolidated Statements of Income as a percentage of net
sales.
Three Months Ended
March 31,
1995 1994
-------- --------
Net sales 100.0% 100.0%
Cost of products sold 70.0 69.6
-------- --------
GROSS INCOME 30.0 30.4
Selling, general and
administrative expenses 16.8 17.4
-------- --------
OPERATING INCOME 13.2 13.0
Nonoperating expenses (income):
Interest expense 2.1 1.2
Other 0.3
-------- --------
Net nonoperating expenses (income) 2.4 1.2
-------- --------
INCOME BEFORE INCOME TAXES 10.8 11.8
Income taxes 4.3 4.7
-------- --------
NET INCOME 6.5% 7.1%
======== ========
9
Three Months Ended March 31, 1995 vs.
Three Months Ended March 31, 1994
-------------------------------------
Net sales for the first quarter of 1995 were $556.6 million,
representing an increase of $113.1 million or 25.5% from $443.5
million in the comparable quarter of 1994. Net sales for each of the
Company's product groups were as follows, in millions:
1995 1994 $ Change % Change
------ ------ -------- --------
Housewares $175.9 $145.5 $ 30.4 20.9%
Home Furnishings 165.9 144.5 21.4 14.8%
Office Products 129.6 69.1 60.5 87.6%
Hardware 85.2 84.4 0.8 0.9%
------ ------ --------
$556.6 $443.5 $113.1 25.5%
====== ====== ======== ========
The overall increase in net sales was attributable to sales growth of
4% from businesses owned more than two years (core businesses) and the
1994 acquisitions of HFI, Eberhard Faber and Newell Europe. The
increase in Housewares sales was due primarily to the Newell Europe
acquisition. The increase in Home Furnishings was due primarily to
the HFI acquisition. The increase in Office Products was due to the
Eberhard Faber acquisition and 26% sales growth from core businesses.
Gross income as a percent of net sales in the first quarter of 1995
decreased slightly to 30.0% from 30.4% in the comparable quarter of
1994. The decrease was due primarily to low gross margins from the
businesses acquired in 1994, offset by improvements in gross margins
in the Housewares and Office Products core businesses.
Selling, general and administrative expenses ("SG&A") as a percent of
net sales in the first quarter of 1995 were 16.8% versus 17.4% in the
comparable quarter of 1994. The decrease was due primarily to a
reduction in SG&A at Goody and a low level of SG&A at Eberhard Faber.
Operating income in the first quarter of 1995 was 13.2% of net sales
or $73.4 million versus $57.8 million in the comparable quarter of
1994. The increase was attributable to sales growth and improved
profitability at the core businesses and contributions from the 1994
acquisitions.
Net nonoperating expenses for 1995 were $13.2 million in the first
quarter of 1995 versus $5.3 million in the comparable quarter of 1994.
The increase was primarily due to additional interest expense of $6.4
million and incremental goodwill amortization of $1.2 million
resulting from the financing of the 1994 acquisitions, and a $2.2
million write-off of intangible assets. This increase was partially
offset by a $1.9 million increase in equity earnings from American
10
Tool Companies, Inc., in which the company has a 47% ownership
interest.
For the first quarter, the effective tax rate was 40.0% in both 1995
and 1994.
Net income for the first quarter of 1995 was $36.1 million,
representing an increase of $4.6 million or 14.6% from the comparable
quarter of 1994. Earnings per share for the first quarter of 1995
were up 15.0% to $0.23 versus $0.20 in the comparable quarter of 1994.
The increases in net income and earnings per share were primarily
attributable to sales growth and improved profitability at the core
businesses.
Liquidity and Capital Resources
-------------------------------
The Company's primary sources of liquidity and capital resources
include cash provided from operations and use of available borrowing
facilities.
Operating activities provided net cash equal to $30.6 million during
the first three months of 1995 versus $34.0 million in the comparable
period of 1994.
The Company has foreign and domestic lines of credit with various
banks and a commercial paper program which are available for short-
term financing. Under the line of credit arrangements, the Company
may borrow up to $351.5 million (of which $255.5 million was available
at March 31, 1995) based upon such terms as the Company and the
respective banks have mutually agreed upon.
The Company has a shelf registration statement covering up to $500.0
million of debt securities, of which $257.0 million was available for
additional borrowings as of March 31, 1995. Pursuant to the shelf
registration, at March 31, 1995 the Company had outstanding $186.0
million (principal amount) of medium-term notes with maturities
ranging from one to five years at an average rate of interest equal to
6.6%.
The Company entered into a three-year $300.0 million revolving credit
agreement in August 1993, and a $100.0 million, 364-day revolving
credit agreement in each of November 1993 and August 1994. The
November 1993 364-day revolving credit agreement was renewed for an
additional 364 days. Under these agreements, the Company may borrow,
repay and reborrow funds in an aggregate amount up to $500.0 million,
at a floating interest rate. At March 31, 1995, there were no
borrowings under the revolving credit agreements.
In lieu of borrowings under the revolving credit agreements, the
Company may issue up to $500.0 million of commercial paper. The
Company's revolving credit agreements referred to above provide the
committed backup liquidity required to issue commercial paper.
Accordingly, commercial paper may only be issued up to the amount
available under the Company's revolving credit agreements. At March
11
31, 1995, $420.0 million (face or principal amount) of commercial
paper was outstanding, all of which was supported by the revolving
credit agreements. The short-term portion of this balance was $120.0
million, which is classified as notes payable. The remaining $300.0
million is classified as long-term debt under the three-year revolving
credit agreement.
The Company's primary uses of liquidity and capital resources include
capital expenditures, dividend payments and acquisitions.
Capital expenditures were $18.2 and $12.1 million in the first three
months of 1995 and 1994, respectively.
The Company has paid regular cash dividends on its common stock since
1947. On May 13, 1993, the quarterly cash dividend was increased to
$0.09 per share from the $0.08 per share that had been paid since
February 15, 1991. The quarterly dividend was again increased to
$0.10 per share on May 12, 1994. Dividends paid in the first three
months of 1995 and 1994 were $15.8 and $14.2 million, respectively.
Working capital at March 31, 1995, was $151.3 million compared to
$133.6 million at December 31, 1994. The current ratio at March 31,
1995 was 1.19:1 compared to 1.17:1 at December 31, 1994. The total
debt to total capitalization was .39:1 at both
March 31, 1995 and December 31, 1994.
The Company believes that cash provided from operations and available
borrowing facilities will continue to provide adequate support for the
cash needs of existing businesses; however, certain events, such as
significant acquisitions, could require additional external financing.
12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
27 Financial Data Schedule
b) Reports on Form 8-K:
(1) Registrant filed a Report on Form 8-K dated
January 30, 1995 reporting the issuance of
a press release regarding the results for the
quarter and fiscal year ended December 31, 1994.
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
NEWELL CO.
Date May 7, 1995 /s/ William T. Alldredge
------------------- ---------------------------------
William T. Alldredge
Vice President - Finance
Date May 7, 1995 /s/ Brett E. Gries
------------------- ---------------------------------
Brett E. Gries
Vice President - Accounting & Tax
14
5
